Monetary and fiscal policies: in search of a corridor of stability

Article by Mr Claudio Borio, Head of the Monetary and Economic Department of the BIS, and Mr Piti Disyatat, Assistant Governor, Monetary Policy Group, Bank of Thailand, in, published on 10 November 2021.

BIS speech  | 
10 November 2021

Monetary and fiscal policies, as deeply entwined functions of the state, face a looming dual long-term challenge. They need to regain policy headroom so as to be able to effectively fulfil their macrostabilisation role. And once those safety margins are restored, the policies need to remain firmly within a "corridor of stability", in which neither can endanger the other or push it to the limit. Navigating the path ahead will require a mix of "opportunistic normalisations" and structural reforms to raise long-term growth.